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How Did Levi's Manage Its Comeback?
1. HOW DID LEVIāS MANAGE
ITS COMEBACK?
AN ANALYSIS OF HOW A STRUGGLING
COMPANY REVIVED ITSELF
Prepared for
Melanie Wise
Prepared by
Anna Sandgren
July 29, 2010
2. CONTENTS
MEMORANDUM ............................................................................................................. 3
INTRODUCTION ............................................................................................................ 6
REASONS WHY LEVIāS LOST MARKET SHARE................................................... 7
Failure to Meet Fashion and Consumer Trends ......................................................................................... 7
New Entrants into the Jeans Market............................................................................................................ 8
LEVIāS COMEBACK .................................................................................................... 10
A Revamped Business Strategy .................................................................................................................. 10
Repositioning ................................................................................................................................................ 11
CONCLUSIONS AND RECOMMENDATIONS........................................................ 13
REFERENCES................................................................................................................ 15
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3. MEMORANDUM
TO: Melanie Wise
FROM: Anna Sandgren
DATE: July 29, 2010
SUBJECT: How Did Leviās Manage Its Comeback? An Analysis of How a Struggling
Company Revived Itself
Here is the report I wrote about how Leviās was able to turn around its business after a
little over a decade of losing market shares.
Leviās is a well-known organization and they enjoyed great triumphs in the last century,
especially from the 1960s to mid 1990s. Maybe the company was doing a little bit too
well, and they took their success for granted. Leviās lacked innovation and stuck to what
they knew, which morphed into offering few product lines that also were out of style. By
not being up-to-date, Leviās lost sales when they missed and failed to forecast trends in
the 1990s. Young people associated Leviās as a baby boomer brand and turned their
backs on the organization. By having a small range of product lines, Leviās also failed to
meet the needs of different market segments. As new rivals entered the market,
consumers could choose from designer jeans to more affordable jeans at retail stores.
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4. In order to turn things around, Leviās widened their product range and created more
product lines. Different lines could be bought from different distributors; premium jeans
at high-end specialty chains and a less expensive line at retails stores. By doing this,
Leviās expanded their availability and could reach more consumers and different market
segments. To prevent from being looked upon as a brand for old people, Leviās put
increased effort into repositioning themselves in order to appeal to younger consumers.
Part of the repositioning was to be seen as a trendy brand and follow what was in style,
not only when it came to fashion, but also trends in society. To communicate with
younger consumers, Leviās now uses mobile shopping technology and social media
outlets such as Facebook and Twitter.
Itās amazing to look back at the history of Leviās and see how they reinvented
themselves. In order to not risk repeating the less successful times in the companyās
history, Leviās needs to constantly come up with new ideas on how to deliver value to
consumers, while remaining socially and fashionably relevant. I recommend the
following:
ā¢ Strategic alliances and licensing. By collaborating with other companies in other
industries, Leviās could enter new product categories and expand beyong clothes.
ā¢ Fast Fashion. By speeding up design processes Leviās could create the absolute
latest in fashion trends, which translates into loyal and happier customers.
ā¢ Customization. Now that Leviās is doing better, the Personal Pair program could
be relaunched and would probably be very successful in an era where customers
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5. (especially Millenials) are looking for more individuality from their clothing
purchases.
I am glad I had the opportunity to write this report. I have gained a lot of insight into not
only an exciting company like Leviās and their comeback, but also into the fascinating
jeans industry as a whole.
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6. INTRODUCTION
The business world is littered with stories of successful companies losing their way and
succumbing to failure. Every so often, among these stories of impending failure, there
comes along a fascinating story about an organization that is able to turn itself around and
not only succeed, but thrive. Leviās, one of Americaās oldest and most esteemed brands,
is just this type of success story. According to the essay āA Short History of Denimā by
Lynn Downey, entrepreneur Levi Strauss and tailor Jacob Davis started to make copper
riveted waist overalls in 1873, which they sold to gold miners during the California Gold
Rush (3). These waist overalls later became better known as ājeansā and by 1960 they
were worn by most of Americaās youth and the Leviās 501 became an American classic
(6). Levi Strauss & Co. achieved great success for more than a century, but the business
took a different turn in the late 20th century. As stated by Vauda Aich in her case Levis
Strauss in the US (Part B): The Great Turnaround Plan, Leviās āsteadily [began] losing
market share in the US [in] 1996.ā Leviās would experience this negative trend for a little
more than a decade, and it was not until April 2007 that the Los Angeles Times would
report that ā[the companyās] fiscal first-quarter profit rose 61%, providing the latest sign
that the long-suffering jeans maker [was] finally on the mend.ā
This report will analyze how a company on the brink of failure was able to get back on its
feet after years of struggling to once again become a fashionable and profitable brand.
The report explains what led to Leviās downfall and what they did to revamp themselves.
Recommendations to maintain and grow a successful brand are also provided.
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7. In preparing this report, several articles and reports have been analyzed and evaluated.
Information was gained from well-known sources such as Bloomberg Businessweek,
Time, and Leviās corporate website. The readings also include an analysis of the jeans
industry, which is incorporated into the report.
REASONS WHY LEVIāS LOST MARKET SHARE
After experiencing more than a century of positive sales trends and market growth, Leviās
began to lose market share in 1996.There were several reasons that set off the downward
trend which lasted for more than a decade, including a lack of innovation, failure to
anticipate consumer trends and an influx of fashion forward competitors willing to do
what Leviās either couldnāt or wouldnāt.
Failure to Meet Fashion and Consumer Trends
In his book Consumer Behavior, Michael Solomon states that in 1993 Leviās was ranked
the most stylish brand in the world (222) and ironically, just three years later, consumers
started to abandon the company in droves. One of the main reasons for consumer
abandonment seems to be that Leviās began to be perceived as no longer being stylish
and having lost touch with what consumers wanted. As mentioned in Stacy Permanās
Time magazine article, āLeviās Gets the Blues,ā Leviās failed to respond to trends in the
90s such as the wide-leg pant. It seems that Leviās thought they could ride the wave of
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8. their success from earlier decades, instead of focusing on innovational strength in order to
keep consumers loyal to their brand.
In her Bloomberg Businessweek article, āWhy Leviās Still Looks Faded,ā Louise Lee
writes that many women turned their back on Leviās because they felt the company did
not have any jeans models āthat quite fit womenās curves,ā because Leviās created
āwomenās jeans from menās patterns.ā This is clear evidence that another area that
became a detriment to Leviās was their lack of cutting edge designers.
Interestingly, it could be that Leviās longevity as a brand actually contributed to some of
its problems. It seems that the fact that Leviās was such a thriving brand from the 1950s
until the mid 1990s, caused teens and young adults in the late 1990s and 2000s to
associate the brand with their parents, which translated into a reason for them to not buy
their jeans. Ellen Neuborne reports for Bloomberg BusinessWeek that Generation Y did
not see Leviās as a very hip brand, and recognized it as a brand that their parents, the
baby boomers, would buy.
It is clear that Leviās took their earlier success for granted and lost touch with the needs
of their consumers and market trends. When they did not have what consumers asked for
they lost their loyalty and in turn market share.
New Entrants into the Jeans Market
In the 1990s the jeans market changed dramatically and Leviās faced stronger
competition than it had in the past. The new entrants into the market were two types:
high-end designer jeans manufacturers and retail chains (Perman). The designer jeans
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9. came from fashion houses such as āDonna Karan, Tommy Hilfiger, Ralph Lauren and
Versaceā and other āedgy upstarts.ā These style-conscious rivals stole sales from Leviās
and had stylish jeans models that followedāand sometimes even setāfashion trends;
something that Leviās jeans and models did not. Many consumers were willing to pay a
premium price to obtain a pair of these much hipper jeans.
Around the same time period, retail stores like Gap Inc., J.C. Penney and Sears started
offering affordable jeans, cheaper than Leviās, which attracted the younger population
and chipped away at even more of Leviās share of the jeans market.
Leviās was confronted by competition from two different directions and they were stuck
in the middle between their new rivalsārivals who went after niche customer segments
and were able to earn profits from them. As a result, both fashion and price conscious
consumers abandoned the Leviās brand.
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10. LEVIāS COMEBACK
Leviās failed to meet consumersā demands in the 1990s and the business overhaul to
make up for this lack of customer focus took them a decade to accomplish. They chose
certain ways to get back on track again, which included introducing additional product
lines to reach more market segments and making their products more available by
improving their distribution channels. Leviās also repositioned their brand so that
consumers would see them as trendy and up-to-date, something that had been sorely
missing for decades.
A Revamped Business Strategy
As Leviās faced increasing competition from designer brands and retail stores they finally
decided to counter their rivals by providing Leviās products at select discounters and
specialty chains (Lee). Leviās approach to turn the tide of lost market share and consumer
loyalty was to develop new product lines to be distributed in different types of stores. In
2003, the company launched their new Signature line, which Leviās website describes as
a brand that āoffers high-quality, fashionable jeans at affordable prices to value-conscious
consumers at [discount] stores like Walmart, Target and Kmart.ā According to Jenny
Strasburgās article in The San Francisco Chronicle, titled āLevi's treats itself to an image
makeover / Once-workaday jeans to challenge designer lines,ā Leviās also made their
way into high-end specialty chains such as āSaks Fifth Avenue, Neiman Marcus,
Bloomingdale's and Nordstrom ā with their premium product lines.
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11. More than offering their jeans at discount and specialty stores, Leviās also tried to make
themselves more attractive to younger consumers by making their jeans available at
Pacific Sunwear of California Inc. and other stores frequented by younger shoppers
(Lee).
An important, and risky, move in Leviās reinvention was to become more obtainable and
offer something to different market segments. Rather than worry about the risk of
thinning out the brand by spreading themselves too thin, Leviās saw the benefit of
diversifying their products to engage with customers who had varying needs and
expectations. Creating a line for selected retail stores was a bold move because Leviās
could have tarnished their brand in the minds of consumers and degraded their legacy of
good quality. The same could have happened with regard to more upscale stores had
patrons of those establishments perceived Leviās jeans as lacking sophistication. Yet
Leviās understood that if executed well, they could expand their range of product lines,
increase their availability, and by doing so be seen as consumer focused and as a result
become profitable once again.
Repositioning
After seeing sales decrease in the 1990s and 2000s due to their failure to respond to
market trends, Leviās also chose to reposition themselves. They began to be seen as being
out of style and out of touch with current trends. In order to prevent further loss of market
share and counter these perceptions, Leviās took the innovative step of āship[ing] in
staffers from its more fashion-oriented European division and [holding] brainstorming
sessions to suss out what [consumers wanted] in their clothesā (Lee). As a result, the new
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13. CONCLUSIONS AND RECOMMENDATIONS
After a little more than a decade of losing consumers, Leviās was eventually able to get
back on their feet and in early 2007 the company could announce that profits were finally
increasing again. After being successful most of the 20th century Leviās had some dark
years at the end of the century and what led them there was their inability to anticipate or
even meet fashion trends as well as the entrance of rivals into the jeans market. Leviās
could not offer stylish jeans models and the consumers abandoned them for their
competitors. By making some bold moves and utilizing smart business strategies Leviās
was able to turn itself around and is today no longer thought of as a baby boomer brand
and has gained popularity among younger consumers. Leviās effectively developed more
product lines and increased their availability to meet the needs of more market segments.
In order to interact with and maintain an ongoing relationship with their young buyers,
the organization makes huge efforts to remain technologically up-to-date and responsive
to societal trends.
Leviās has hopefully learned their lesson to not take success for granted. Upholding a
relationship with consumers and keeping them loyal to their brand is a continuous task
and Leviās needs to be innovative and create new ways to maintain these relationships.
Different ways to do so could be:
1. Strategic alliances and licensing. Leviās has often teamed up with different
organizations to give back to society, e.g. the White Knot and Goodwill, but
could take it further and join forces with other parties to create more Leviās
products than just clothes. Leviās logo could be seen on products such as
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14. furniture and home accessories such as sheets, blankets etc. Since Leviās
sponsors music festivals, camping gear could also be part of their product
range.
2. Fast Fashion. Leviās could meet trends faster and enjoy higher consumer
satisfaction by speeding up the process of spotting trends, manufacturing and
distribution. Similar to Zara, Leviās could engage in āFast Fashionā and would
develop products quicker and have them in stores more rapidly.
3. Customization. Leviās offered the Personal Pair program to consumers from
1994 to 2003. People got measured at Original Leviās stores and could a few
weeks later enjoy their own customized jeans. Leviās decided to discontinue
the program to put efforts into restrengthening the brand. Now that Leviās has
improved their brand, the program could be relaunched.
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15. REFERENCES
Aich, Vauda. āLevis Strauss in the US (Part B): The Great Turnaround Plan.ā IBS Case
Development Centre 2006.
http://www.ibscdc.org/Case_Studies/Strategy/Restructuring%20Turnaround%20S
trategies/RTS0112B.htm>.
CalderĆ³n, Sara I. āLeviās Uses New Facebook Plugins to Reach Potential Jeans
Purchasersā, Inside Network 27 Apr, 2010. 23 Jul, 2010.
<http://www.insidefacebook.com/2010/04/27/levi%E2%80%99s-uses-new-
facebook-plugins-to-reach-potential-jeans-purchasers/>.
Downey, Lynn. āA Short History of Denim.ā Levi Strauss & Co 2007.
<http://www.levistrauss.com/sites/default/files/librarydocument/2010/4/History-
Denim.pdf>.
āDressed to impress?ā CMDGlobal.com 20 October, 2007.
<http://www.cmdglobal.com/analysis/brand_experts/levis>.
Lee, Louise. āWhy Leviās Still Looks Faded,ā Bloomberg Businessweek 22 Jul, 2002. 23
Jul, 2010.
http://www.businessweek.com/magazine/content/02_29/b3792068.htm>.
āLevi Strauss earnings rise 61% in 1st quarterā Los Angeles Times 11 April, 2007.
<http://articles.latimes.com/2007/apr/11/business/fi-levi11>.
Neuborne, Ellen. āGeneration Y,ā Bloomberg Businessweek 15 Feb, 1999. 23 Jul, 2010.
<http://www.businessweek.com/1999/99_07/b3616001.htm>.
Perman, Stacy. āLeviās Gets the Blues,ā Time 17 Nov, 1997. 23 Jul, 2010.
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16. <http://www.time.com/time/magazine/article/0,9171,987368-1,00.html>.
āSignature.ā Levi Strauss & Co. <http://www.levistrauss.com/brands/signature-by-levi-
strauss>.
Solomon, Michael. R. Consumer Behavior. Upper Saddle River: Pearson, 2009. 222.
Strasburg, Jenny. āLevi's treats itself to an image makeover / Once-workaday
jeans to challenge designer linesā, The Chronicle 15 Aug, 2002. 23 Jul, 2010.
<http://articles.sfgate.com/2002-08-15/business/17556016_1_levi-strauss-
neiman-marcus-saks>.
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